Wednesday, September 23, 2009

Better Off on Benefits?

The poverty trap occurs when there is no incentive to get a better paid job because of the lost benefits, and increased taxes and other costs.

The unemployment trap occurs when there is no incentive to get a job because, you are better off on unemployment benefits than working.

Reading our local newspaper, the Oxford Mail, I was intrigued about their story suggesting many single mothers said there was no point for them to get a job. Quite a few people interviewed said, they would like to work, but, if they did they would be worse off because of the lost benefits and extra costs involved.

For example, one mother said that currently she received £70 a week benefits (£40 of income support and £30 child tax credit. She is also exempt from paying council tax (about £800 a month) and her rent of £75 a week is paid for her. In addition their are many benefits in kind for people on income support (free prescriptions).

If you include the free rent, the government is paying over £150 a week and is missing out on the work related taxes.

Another mother, Nickki Green, a mother of two said:

"I left work, because you get more help with child tax credits than I could have earned in a week's wages as a nursery nurse. It's ridiculous if you think about it."

The thinktank the Centre for Social Justice suggests many claimants taking a job paying less than £15,000 a year were worse off than if they remained out of work.

The DWP have started a campaign to show people they are better off working. They also emphasise that working has other benefits such as promoting self-confidence and being good for mental and physical health.

The budget for social security is by far the largest component of government spending.It is over £170bn and forecast to top £200bn in 2010.